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Tesla’s (TSLA) first-quarter earnings, reported yesterday April 19, after the market close, met expectations. But first-quarter automotive gross profit margins came in worse than expected.

Tesla reported a profit of 85 cents a share, meeting expectations, on sales of $23.33 billion, just a touch below forecasts for $23.67 billion. Tesla’s other business generated a record $303 million in gross profit. Tesla deployed 3.9 gigawatt hours of battery storage in the quarter, up about 300% year over year.


Automotive gross profit margins, excluding regulatory credits, came in below 16%, down from about 21% in the fourth quarter of 2022. It is the first time that number has been below 20% since the second quarter of 2020.

Including leases, the auto business generated gross profit margins of about 19%, below Wall Street expectations of 21%, and below the 20% investors were looking for.

Total operating profit reported came in at $2.7 billion, below Wall Street’s expectations for $3 billion. Operating profit margins came in at 11.4%, down from 19.2% in the year-ago quarter. Excluding stock-based compensation, operating profit margins came in at about 13.2%. But if you put stock-based compensation back into expenses operating profit margins of 11% make Tesla look like a traditional automaker. For example, Toyota Motor‘s (TM) fourth-quarter operating profit margin came in at almost 10%.

Tesla’s multiple price cuts in the last year were a big reason. A proxy for the average price per vehicle sold, Barron’s calculated by taking automotive sales plus lease revenue and dividing it by deliveries, was about $47,200, down from about $54,400 in the first quarter of 2022. And gross profit margin per vehicle sold including leasing was about $8,600. A year ago, that number was about $15,700.

It hasn’t helped the stock price today that Tesla CEO Elon Musk didn’t give margin guidance on the company’s earnings call. “It’s difficult to say what the margin will be,” Musk said.

Wall Street analysts found some solace in the company’s forecast for increased production and lower costs once the company gets its new Mexican mega-factory in production.

But that didn’t prevent widespread reductions in target proved on the stock, which had rallied more than 45% to start the year. For example, Jefferies maintained a Buy rating on Tesla, but cut its price target to $230 from $250. Wedbush’s Dan Ives, a longtime Tesla bull, cut his price target on the stock to $215 a share from $225 on the back of the tightening margins.

The stock closed at $162.99 today, down $17.60 a share (for a loss of 9.75%).